The Daily Sheeple
July 18th, 2012
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‚ÄúSomewhere down the line we will have a massive wealth destruction. That usually happens either through very high inflation or through social unrest or through war or credit-market collapse.‚ÄĚ And as if to punctuate his message, in Barron‚Äôs recent ‚ÄúMidyear Roundup,‚ÄĚ Faber was asked, ‚ÄúWill things get worse before they get better?‚ÄĚ
Answer: ‚ÄúYes, possibly much worse,‚ÄĚ adding ‚Äúmost markets peaked in May 2011.‚ÄĚ He expects ‚Äúfurther weakness in the second half of the year. Corporate profits will disappoint ‚Ä¶ stock markets are oversold. The U.S. government-bond market is overbought. The U.S. dollar is overbought, and gold is oversold near term.‚ÄĚ Worse, he‚Äôs ‚Äúvery negative about the outlook longer term.‚ÄĚ
In spite of his doom and gloom about America and the world economy, when pressed Faber did recommend some China REITs. And waffled a bit on America: ‚ÄúIt is safest to buy U.S. Treasurys because the U.S. can print money‚ÄĚ and ‚Äúpay the interest. But you are earning only 1.6%, and the cost of living is increasing by about 5% a year around the world. You are getting a negative real return.‚ÄĚ
Not very promising in today‚Äôs uncertain world, where the American elections are unlikely to solve the economy‚Äôs core jobs problem, no matter who wins in November.
So when comes the change? ‚ÄúDown the line.‚ÄĚ ‚ÄúThe breaking point could be three, four, five years away. The world is heading toward a major crisis.‚ÄĚ
OK, he hedges his bet on timing. But he‚Äôs very clear on how and why: The collapse will be ‚Äúcaused by Federal Reserve Chairman Ben Bernanke and the Federal Reserve‚Äôs continuous printing of new money.‚ÄĚ The ‚Äúbailout and money printing‚ÄĚ since the 2008 Wall Street Crash did not ‚Äúcreate any long-lasting wealth or create healthy growth.‚ÄĚ Nor will the next president. So investors must hedge longer-term bets.
New crash coming before Bernanke leaves Fed by early 2014
The next ‚Äúcollapse will come on Bernanke‚Äôs watch.‚ÄĚ Warning to investors: Bernanke‚Äôs second four-year term as chairman of the Fed ends Jan. 31, 2014. (He will remain a board member until 2020.)
Get it? There will be another crash. The crash will ignite before 2014 when Bernanke‚Äôs term ends. The crash will be worse than 2008. Bernanke will be the cause. He will be clueless about the unintended consequences of his policies (like his predecessor Alan Greenspan, who ultimately had to admit to Congress ‚ÄúI really didn‚Äôt get it until very late.‚ÄĚ)
Bernanke‚Äôs no different. When reappointed in 2010, ‚ÄúBlack Swan‚ÄĚ author Nicholas Taleb said Bernanke ‚Äúdoesn‚Äôt even know that he doesn‚Äôt understand how things work.‚ÄĚ
Unfortunately, since Wall Street simply went back to business as usual after the 2008 Crash, fighting all reforms, a new crash is not only easy to predict in the 2013-2014 period, we can also predict that it will be far more deadly for Wall Street banks, the American economy, taxpayers, investors, consumers and retirees.
Guess what? Many ‚ÄėDr. Dooms‚Äô predicted 2008 crash
Why so easy to predict? Because we‚Äôre repeating all the same dumb and dumber mistakes we did in the year leading up to the 2008 crash. The Fed‚Äôs cheap money policies have favored banks, devaluing the dollar, destroying the value of stocks, fueling inflation, triggering job losses and social unrest. In short, the happy conspiracy between the Fed and Wall Street is suicidal and will take down the rest of America with it.